Also helping to boost the Nikkei to a 2.4% bounce overnight following a 3% plunge on Friday was a report on the Government Pension Investment Fund temporarily removing a cap on domestic stock investment.
The action enables the massive GPIF to allocate more funds to Japanese stocks ahead of the upcoming official review at which it's likely to be allowed to raise its goal for equities to 20% of the portfolio from the current 12%. "[It's] a surprise for the market in that they are going to increase their stock holdings sooner," says a local equities strategist.
The Nikkei capped a tough week, falling 3% overnight with Obama's ordering of airstrikes in Northern Iraq a convenient excuse for the decline.
Today's session also happens to be the busiest earnings report day of the season and Nikon Corp. tumbled 9.4% after lower full-year guidance, Taiyo Yuden dove 8.9% after cutting its outlook, and Nisshin Steel plunged 9.8% after profit fell 99%.
The BOJ maintained its pledge to boost the monetary base by ¥60T-¥70T.
The dollar is weaker vs. the yen by 0.25%, with dollar/yen down to ¥101.83.
Dan Loeb's Third Point hedge fund is renewing a bet on Argentine government debt, expecting the country will reach a deal with creditors to resolve claims from its 2001 default by the end of the year, and is taking a stake in state-controlled oil company YPF (YPF +5.2%).
"We are in the midst of a critical inflection period for the country: If the government settles with its hold-out creditors, Argentina will regain access to global capital markets,” according to the hedge fund's Q2 letter to investors.
Third Point says Japan has been the biggest source of losses this year, but the firm is still finding opportunities in the country and expects macro conditions that have been headwinds to become more favorable toward the end of the year.
Earlier: YPF pops as Third Point is said to increase stake.
Japanese shares fell to a one-week low today and dropped to their largest one-day fall in three weeks after investors turned risk averse due to the downed Malaysian Airlines passenger jet shot down over Ukraine's eastern border.
The Nikkei sank 1% to 15,215.71, its lowest close since July 11. The index also fell 1.7% at one point during Friday's trading.
The Topix shed 0.8% to 1,263.29 at the close of trading in Tokyo. JPX-Nikkei Index 400 dropped 0.7% to 11,505.50.
Japanese shares rose today, with the Nikkei climbing 0.3% to 14975.97, after dropping 1.1% on Monday, although trading volume hit its two month low amid escalating tensions in the Middle East and Ukraine.
The Topix rose 0.3% to 1,238.20 at the close of trading in Tokyo, with 1.68B shares changing hands. JPX-Nikkei Index 400 also ended up 0.3% at 11,275.02.
Dollar/yen slid back 0.1% to ¥101.91, after rising 0.2% yesterday.
The Government Pension Investment Fund should announce a reshuffling of assets in which, predicts Nomura, it would sell as much as $200B in domestic bonds to buy overseas assets. The team at Nomura sees the move as weakening the yen about about 10%.
If done at the right time, says Mitsubishi UFJ's Daisaku Ueno, dollar-yen could top ¥110 this year (¥102 at the moment).
A Bloomberg survey sees the fund cutting its local bond holding from 60% to 40%, and boosting its targets for foreign stocks to 17% and 14% (from 12% and 11%, respectively).
Also helping is Reuters reporting Japan Post Insurance - with about $846B in AUM - planning to boost its allocation in domestic stocks by as much as $3.4B this year. Also slated for a higher allocation are overseas bond holdings.
Among the leading decliners was SoftBank (SFTBF), -5.1% as investors sold the news on the Alibaba offering. Exporters tanked as well, with a 2.9% fall in Honda and 3.4% decline in Panasonic pacing those slides.
Buy the dip? Last night's 2.4% dive brought the Nikkei lower by about 7% for the week - it's worst 5-day stretch since the 2011 earthquake and tsunami. The index is now off about 14% YTD.
Maybe not helping is April 1's boost in the sales tax to 8% from 5%. The last previous sale tax boost in 1997 proved to be a rally-killer. "2014 is not 1997," says JPMorgan's Jesper Koll. "The probability of success is better than ever." We shall see.
Asian shares have traded mixed in a choppy session in which the Nikkei recovered to close up 1% after falling earlier in the day. Market players pointed to reinvestment by a public pension fund and short-covering as reasons for the reversal.
The Shanghai Composite fell 0.8% and the Hang Seng 0.2% as tech stocks took a beating following a bad debut on Wall Street for "Candy Crush" developer King Digital.
The Nikkei leads Asian stocks lower following more weak Chinese economic data yesterday and amid increased tension in Ukraine, with the Japanese index slumping 3.3%. A sharp rise in the yen overnight didn't help matters.
"Japan stocks often take the first hit on bad Asian news, then when the U.S. markets fall later, they react to that as well, resulting in a 'double whammy' effect," says hedge-fund manager Ed Rogers.
Hong Kong shares are also suffering as the Hang Seng drops 0.9% and heads for its worst week since May 2012.
The Nikkei gained 2.9% last night. DXJ +1.1% premarket
¥2.6T in QE later, William Pesak notes one year of aggressive monetary ease has failed to lift living standards, nor has it convinced companies to boost paychecks. The only inflation Japan is feeling is the kind no one likes: Higher energy prices.
BOJ Governor Kuroda's main achievement this year, argues Pesak, is to settle once and for al that the country's problem isn't the amount of yen sloshing around, but how it's used. Unless people borrow and banks lend, the economy won't revive. And don't forget the secular deflationary forces of an aging population and the rise of China.
The Bank of Japan has surprised markets by expanding lending facilities that are designed to spur corporate investment by offering low-interest loans to commercial banks in the hope that they will lend the money to businesses.
At a policy meeting, the BOJ doubled one program to ¥7T ($68B) and said individual banks could borrow twice as much under another facility.
The BOJ also maintained its program of increasing the monetary base by ¥60-70T a year.
The boosting of the lending facilities comes after data yesterday showed that Q4 GDP grew a less-than-expected 0.3%. Notwithstanding, the BOJ maintained its view that Japan is recovering moderately.
The move helped weaken the yen and the Nikkei to surge 3.3%. The USD-JPY is +0.6% at ¥102.57. (PR)
Japanese GDP growth slowed to 0.3% on quarter in Q4 from 0.5% in Q3 and missed consensus of 0.7%.
Annualized GDP softened to +1% from +1.1% and undershot forecasts of +2.8%.
The GDP deflator, "which measures the change in prices of final goods and services and is considered as a key indicator for inflationary pressures," fell to -0.4% on year from -0.3%.
Industrial production +0.9% in December vs -0.1% in November and consensus of +1.1%. On year, output +7.1% vs +4.8%.
Capacity utilization +2.2% vs -0.5%.
Japan's Q4 economic performance was kept down by strong import growth, which is a negative factor in GDP calculations, and a limited increase in exports.
Imports +3.5% on quarter, exports +0.4%, business investment +1.3%, consumer spending +0.5%.
The soft growth adds to pressure on Prime Minister Shinzo Abe to detail reforms that will make Japan more competitive. This is especially the case with the upcoming rise in sales tax in April.
"This weak export performance gives us a sense of risk that the Japanese economy may significantly stall after April," says economist Takuji Okubo. "Abe really needs to be quick in showing to the market that he can deliver reform."
The data comes a day before the Bank of Japan is forecast to leave its monetary policy unchanged.
Despite the disappointing GDP, short covering helped the Nikkei end +0.6% following a day of choppy trading.
The Nikkei closes -0.6% to round off its worst month since May 2012, with the index dropping 8.5% in January.
Stock markets seem to be still highly troubled by the concept of positive economic news. In the U.S., the economy is trundling along nicely, while in Japan, inflation is heading towards the BOJ's 2% target and unemployment has hit a 16-year low. But it means that the Fed is tapering and the BOJ is less likely to add to its already massive stimulus.
Much of Asia is closed today, due to the start of the Lunar New Year, which will keep Chinese markets shut until February 6.
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